TME: 018 Trading For A Living

In 2013 Gallup’s American Workplace study 70% of those who participated described themselves as disengaged from their work. So if you are reading this article there is a 70 % chance that you do not like your job. Imagine this. We spend 40 hours per week at work. There are 168 hours in a week 56 of those are for sleeping. That leaves 112 hours. If you spend 40 hours per week working then 35% of your time awake is at work. So shouldn’t we enjoy what we are doing?

If you are reading this then you are at least someone that is interested in trading. Have you ever considered a trading for a living?

Trading for a living could offer the freedom that you have always dreamed of. A trading career could be that dream job. Do you have what it takes?

People view the person who trades for a living as someone who is on the floor of the stock exchange yelling bid and ask prices all day long.

In today’s time computers make the trade and if you have a computer then you can be a trader. There are many options that a trader has in today’s time.

Some require time, effort, and education. For others you just need an account and a good trading system.

Trading for a Living Career Path

So what are the paths that take a person on the road to trading for a living?

Trade your own account– this in my opinion would be the pinnacle of a person who trades for a living. You get to be your own boss. If you are trading your own money then no one else can tell you how to trade. You have true freedom. Another upside is you don’t have to worry about losing other people’s money. Imagine you at work trading other people’s money and 2008 hits. You have to explain to people that their money is gone.

The down side would be that you need a good bit of money before you can actually quit your job. If you were able to make 30% per year you would need $300,000 to make $100,000 per year.

Proprietary Trading- In Proprietary trading a trader is provided with capital from the proprietary trading firm’s capital. The trading and risk is partially managed by the firm. Some firms require the trader to put up their own money and they give the trader leverage. For example the trader will put up $5000 and the firm will give the trader 20 times that in leverage. So in that example the trader could trade with $100k worth of leverage. Some proprietary trading firms offer free training and some charge for the training. Some licensing may be required. Many traders take the Series 7 & 63

Trade for a Hedge Fund- Hedge funds are in news stories almost daily. When oil goes to high blame the hedge fund. When corn goes to high blame the hedge fund. Whatever happens bad in the financial market blame the hedge fund. With that being said hedge funds employ some of the most well paid business professionals anywhere. It’s not easy to get a job in that field. It has been said that many hedge funds get up to 100 inquiries a week from students and experienced professionals.

A Few Good Traders.

Paul Tudor Jones (1954-Present)The founder of Tudor Investment Corporation, a $12 billion hedge fund, Paul Tudor Jones made his fortune shorting the 1987 stock market crash. Jones was able to predict the multiplying effect that portfolio insurance would have on a bear market. Portfolio insurance, a popular risk management tool, involves buying index puts to lower one’s portfolio risk. Thus, in a bear market, more and more investors will choose to employ their put options and drive the market down even further. Jones’ bet paid off big: on Black Monday of 1987, he was able to triple his capital from his short positions. Jones is worth roughly $3.6 billion today and is currently managing his hedge fund.

George Soros (1930-Present)George Soros is arguably the most well known trader in the history of the business, known as “The Man Who Broke the Bank of England.” In 1992, Soros made roughly $1 billion in a bet that the British pound would depreciate in value. At the time, the pound had been introduced into the European ERM rate – an exchange rate mechanism designed to keep its listed currencies within a set of defined parameters to increase systemic financial stability. With the help of his associates at his hedge fund, the Quantum Investment Fund, Soros noticed that the pound was not fundamentally strong enough to stay in the ERM, and built up a short position to the tune of $10 billion. Soros is currently worth an approximated $19 billion and is retired.

John Paulson (1955-Present)Praised by some for executing the “greatest trade ever,” John Paulson made his fortune in 2007 by shorting the real estate market by way of the collateralized-debt obligation market. Paulson founded Paulson & Co. in 1994 and was relatively unknown on Wall Street – that is, up to the financial crisis that began in 2007. Foreseeing the asset bubble in real estate, Paulson’s funds made a reported $15 billion in 2007, while Paulson himself pocketed a tidy $3.7 billion. For profiting stupendously while the global economy staggered, Paulson came under intense scrutiny of the U.S. federal government during this time. Today, Paulson continues to manage Paulson & Co. and is worth roughly $11 billion.

Trading For a Living

Trading for a living is a great dream of many traders. It is a job that involves a lot of hard work and a lot of self-education. It may take years to build your own tested and proven trading system. It may take hundreds of interviews before you land a job with that dream hedge fund but if your dream is to become a trader then you can do it if you put in the time and effort. There are some things that can speed the process to trading for a living.

Get on a budget– It takes money to make money. We have all heard that saying but it is true. You can be the best trader in the world but if you only have $1000 to trade with it’s going to take a while to trade for a living.

Cut your expenses– If you spend less you will need less to live on. That is a pretty easy statement but it is one that is hard to follow by many people.

Paper TRADE– Some brokerages have free paper trading. This is good so you can learn to trade with play money not real money. You will trade just like it is real so you will learn the lingo and see how your system works.

Build or buy a System– Without a system the new trader is more than likely doomed to failure. Every trader needs a system. This takes the stress out of trading because the system has been tested. Test the system before you trade it. There is no way for you to gain confidence in a system unless you trade it yourself. So you need to test the system before you trade the system.

Conclusion

Trading as a career can be very difficult on your emotions and your bank account. Many people have made their living trading. Many people will continue to make a living trading. Most traders lose money trading. There are some who continue to make money year after year. The good trader trades with a system the others end up broke.